Tuesday, September 1, 2009

Safety and Soundness Review

Perhaps your credit union has built up some experience making member business loans, and annual portfolio reviews have always been conducted by an independent firm. A Safety and Soundness Review has a much more extensive Scope of Work. 999 Process Map: The development of a process "Map" for the current loan underwriting process from origination to closing, including "sub-maps" for the loan boarding and documentation processes.

Underwriting Procedures: A comprehensive review of documented underwriting procedures, including recommended modifications and, if necessary, a draft of a Draft for a revised Procedures Manual.

Risk Grading System: A review the current Risk Grading System, testing any recent changes in Risk Grade for downgraded loans and validating the accuracy of the current Risk Grading system. If necessary, develop a new Risk Grading System, and test its validity.

Technology Review: An overall evaluation of the technology available to support the business lending group, including:

  • The loan application process
  • Financial statement analysis, such as the software for spreading financial statements for both the company and guarantors, and property valuation models.
  • Loan documentation and servicing systems.
Loan Documentation: Review and evaluate loan documentation procedures, including an evaluation of available technology and outside support provided by counsel.

Organization and Staffing: Create an organizational chart for the current business lending group, detailing the roles and responsibilities within the Group. Evaluate the current production capacity and relationship management responsibility of the lending staff to determine "account officer loading".

Findings Report:
Prepare an overall findings report, including observations and recommendations on overall operations of the Group, including the current strategies, processes, systems, structure and staffing.